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Tuesday, 14 August 2012

Practical result of abolishing the stable measuring unit assumption

Practical result of abolishing the stable measuring unit assumption

In practice abolishing the stable measuring unit assumption, i.e. correctly accepting and implementing the proven fact that money (the monetary medium of exchange) is never perfectly stable under inflation and deflation within and economy will mean that financial statements as prepared at a specific date (e.g. the year end) will only be valid when consulted on that specific date, i.e. the year end date. When the financial statements are consulted after that date, all values at the stated historical date will be updated in terms the current, i.e. today´s, Daily CPI: the date on which the financial statements are consulted. The amounts of the items stated at the date the financial statements were prepared shall then be historical reference amounts (not values – value can only be perceived in terms of current value, i.e. today´s Daily CPI) as at the date of the financial statements and the Daily CPI at that date always to be updated in terms of the Daily CPI to the current, i.e. today´s, date thereafter.

In digital financial statements the amounts at the date of the financial statements will only be visible as part of the financial statements on that date. Thereafter they will never be part of the financial statements again to be seen as original fixed nominal historical amounts. They will be in memory (and on all original dated hard copy documents) at that date with a historical amount (not value – value can only be perceived in terms of current value, i.e. today´s Daily CPI) and the Daily CPI at that date. When consulted at any time after that date the original historical fixed nominal amounts of their real values measured in terms of the Daily CPI at the historical date will always be updated in terms of the current, i.e. today´s, Daily CPI.

During inflation their real values will remain the same for an indefinite period of time, but their nominal values will generally increase daily in terms of the Daily CPI.

During deflation their real values will remain the same for an indefinite period of time, but their nominal values will generally decrease daily in terms of the Daily CPI.





Nicolaas Smith Copyright (c) 2005-2012 Nicolaas J Smith. All rights reserved. No reproduction without permission.